Jul. 24, 2013

DT

Written by

Art Woolf

Free Press Contributor

Vermont’s June unemployment rate jumped from May’s level of 4.1 percent to 4.4 percent, but that’s not any cause for concern. The increase is not because of the recent IBM layoffs, which won’t be reflected in the unemployment figures until July or August — and they may not even show up at all if many of those laid-off employees find jobs relatively quickly. Indeed, in recent weeks there has been no discernible upward spike in the number of Vermonters applying for unemployment insurance from the state despite the IBM layoffs. (Unemployment insurance claims are one of the few pieces of economic data that we have on a weekly basis.)

The jump in unemployment merely brings the state back to where it should have been. As the graph shows, beginning in January Vermont’s unemployment rate fell pretty dramatically, declining by a full percentage point from November to April. Unemployment rates usually fall at a more glacial pace than our recent experience so that rapid decline was probably due to statistical issues rather than being a reflection of actual economic conditions and trends.

I wouldn’t be surprised if the rate continues to notch up a little for a few months, although it will probably settle down to somewhere between four and four and a half percent by the end of the year.

Even with the recent rise, Vermont’s unemployment rate is still fourth lowest in the nation (only the Dakotas and Nebraska are lower) and three points below the national rate of 7.6 percent. Indeed for most of the past three and a half years, Vermont has been between three and three and a half points below the national unemployment rate.

That gap won’t persist over the long term. The Federal Reserve has pledged to keep its current policies in place until the U.S. rate falls below six and a half percent. If the current relationship between Vermont and the U.S. rates continues, that would put Vermont’s unemployment rate at around three percent. That may happen, but probably won’t. When, and if, the U.S. economy finally moves into a robust recovery mode, we’ll most likely see Vermont’s unemployment rate dip below four percent, but we’re unlikely to see it reach three percent.

Art Woolf is associate professor of economics at UVM and editor of The Vermont Economy Newsletter.